Yahoo just hired its fifth CEO in five years, this time it's Marissa Mayer of Google fame.
Context: Yahoo's home page reaches 700 million users/month; they earned $5 billion in 2011 (down from $6.3b in 2010); and have a market cap of $19 billion. That's something to work with, though the downward revenue trend, constant layoffs, and inability to hire talent (except for Mayer) are disquieting.
So... what will she do that the four+ before her didn't or couldn't?
I would suggest one of two approaches - both are dramatic, one is easy and the other is a gamble.
Option 1 - Easy: before the week is out, get a meeting with Steve Ballmer and offer him Yahoo + Marissa for a cool $25 billion (a mere 25% uplift on their current valuation). "The deal is good through the weekend Steve, you have my number."
Why would Microsoft be interested? The reasons for pursuing Yahoo in 2008 still exist -- it would give them a stronger base from which to compete with Google on search, and it would create a real Microsoft presence in the Valley -- something they've been craving for many a moon.
But there's one more reason -- Marissa herself -- she would be a huge feather in Steve's cap. With former Yahoo exec Qi Lu already running their Online Division, I'd look to place Meyer as either the leader or leader-in-waiting of the Server and Tool Division. This division has $17+ billion in revenues (3x Yahoo), and with a visionary leader, could do much better than their current 10% CAGR. It would IMO be better for her not to compete directly with Google, and instead forge a new and hopefully profitable path of her own.
The MSFT Board might also look at her as their 3rd CEO...
In essence, the Yahoo board would have hired Meyer as acquisition bait to create a graceful exit.
Option 2 - Risky: rethink Yahoo's business altogether. Look at the current search/email/ad business as Yahoo One, and put it in maintenance mode. Now use this cash flow to cover the startup costs for the next adventure, and to engage the next competitor -- Amazon.
Yahoo still has a good technology reputation; they know how to run data centers, have partnerships around the world, and are proven in hosting and provisioning services globally. I would use these assets to establish a business akin to Amazon Web Services - AWS (whose recent service outages have given new entrants a window of opportunity) -- Yahoo Two.
The Yahoo Developer Network and their Tools give them a resource leg-up + a community of app developers to kick start things. But the difference maker is the connection to their existing small business customer base -- this could be a huge attractor for companies looking for app-hosting providers, and might even lead to a partnership/merger with someone like Salesforce or Quicken.
This gives Yahoo Two a slightly different positioning vs. AWS, and I think an advantage and differentiation in the long run. Their initial customers would lean more B2B, which would be easier, and give them a "known" base from which to pursue consumer-facing companies. They could even eventually integrate their email/web/ad services within Two for their app clients.
This is not an easy row to hoe, and it would require something that Yahoo does not have enough of today - a really talented computer science/engineering team. This is where Meyer comes in -- as a computer scientist, she would be able to woo talented graduates and professionals to Yahoo Two with her credibility + the lure of being part of something new and big with a proven winner.
Yahoo Two is a risky strategy, one that veers away from what made Yahoo Yahoo, but their current trajectory aims them squarely at AOL, whose market cap is $2.6 billion on revenues of $2 billion...
Not sure you want that on your resume Marissa.